Are Bitcoins an asset of the future? Or are they ticking time bombs like fracking and complex derivatives? Bitcoins are the dominant element in a new phenomenon called virtual, or cyber, currency. They account for $10 billion of what is now a $12 billion industry.

In 2009 a person using the pseudonym of Satoshi Nakamoto developed the unalterable algorithm that brought Bitcoins into existence. Virtual currencies are designed to facilitate secure and direct Internet transactions between two entities (peer to peer). There is no intermediary involvement by banks or governments, but each party has to agree to accept a designated cyber currency (e.g., Bitcoins) as payment.

The algorithm provides for new Bitcoins to be created (up to the annual limit) by authorized "miners" that also record payments. All transactions are anonymous. "Wallet" software can be installed on individual computers to send and receive Bitcoins. (Due to hacking, it hasn't always worked smoothly.) The number of Bitcoins outstanding is roughly 12 million. Nakamoto's algorithm permits the total of newly minted currency to increase by 0.6 percent annually until they reach a total of 21 million by 2140.

Several problems have emerged to cloud the cyber currency's short-term future. Glitches have developed in programs governing transactions. Some of the authorized "miners" have encountered their own financial and digital difficulties, which have imperiled smooth currency flows. There have been security breaches. The price of a Bitcoin has proven to be extremely volatile due to speculation. In 2013, for instance, it fluctuated from less than $50 to more than $1,200.

But the biggest issue to date has been the utilization of Bitcoins to fund illegal activities, such as drug trafficking. There have been several high-profile arrests. Some nations (e.g., China) have banned Bitcoin usage. Others (e.g., Sweden) have tried to determine how to tax cyber transactions. Still others (e.g., the U.S.) are searching for regulatory avenues. As might be expected, the anonymity feature, so dear to cyber currency fans, sets off alarm bells in the halls of governments.

Money requires an act of faith. National coinage, and even gold, trade at values divorced from any inherent worth. Faith in a currency is directly related to the national and international agencies that back it. As yet, Bitcoins have no widely respected guarantors or sponsors to underlie any faith placed in them.

Initially I dismissed cyber currencies as being just another Ponzi scheme. Now I am not so sure. As the technology improves, and trust in governments wane, this new medium of exchange could herald a wave of the future.